Central Banks


Turkey’s central bank announces the decision of its June monetary policy meeting

  • Prior one-week repo rate 16.50%

Expectations for the decision were very much divided with forecasts all over the place from no change to a 100 bps rate hike in the one-week repo rate.

That’s very much above the forecast high of a 100 bps hike, looks like they mean business to keep the lira from falling further.

No details are published on the other rates. But remember, they moved to a interest rate corridor on 28 May – so those rates are now fixed based on the one-week repo rate.

The lira is gaining heavily on the back of the decision, as the hike was much greater than most anticipated:

Statement by the central bank:

  • If needed, additional tightening will be made
  • All tools to be used in line with price stability aim
  • Inflation expectations continue to pose risks on pricing behaviour
  • Decided to tighten policy to support price stability
  • Monetary policy stance to be maintained decisively until inflation outlook displays significant improvement

This makes things really interesting. It’s a strong signal for investors and the lira that the central bank is willing to act independently – and the lira along with Turkish assets should strengthen on the back of that.

But with the presidential elections coming soon on 24 June, you have to figure Erdogan is just waiting on the outcome and if he wins, you have to wonder if all hell will break loose.



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